Malaysian banks face earnings test amid bond market volatility
KUALA LUMPUR: Malaysian banks could face pressure on their third-quarter earnings from global bond market volatility and potential mark-to-market losses, although strong fundamentals should help cushion the impact.
KUALA LUMPUR: Malaysian banks may experience a testing period for their third-quarter earnings due to volatility in the global bond market and potential mark-to-market losses, according to CIMB Securities Sdn Bhd. Despite this, the research firm maintains an Overweight rating on the Malaysian banking sector, recognizing the banks' capacity to endure the uncertainty.
The research firm highlights Public Bank Bhd, RHB Bank Bhd, and Hong Leong Bank Bhd as top picks, with Buy calls on all three. The target prices for Public Bank are RM5.35, RHB Bank is RM9.00, and Hong Leong Bank is RM26.40.
Public Bank's capital return plan, valued at RM3.5 billion, is expected to boost shareholder returns and maintain dividend yields above six percent between 2026 and 2028, potentially increasing return on equity by 0.7 percentage points. RHB Bank's growth prospects are anticipated to be enhanced through capital management initiatives, including a comprehensive framework in preparation for Basel 3.1 capital requirements.
Hong Leong Bank's growth is projected to benefit from improved digital capabilities, above-industry loan growth, and strategic partnerships.
The research firm projects dividend yields of 6.46 percent for Public Bank, 6.90 percent for RHB Bank, and 5.19 percent for Hong Leong Bank in 2026. By 2028, the yields are forecast to be 6.42 percent, 7.65 percent, and 5.57 percent, respectively.
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